Returns At Garware Hi-Tech Films (NSE:GRWRHITECH) Are On The Way Up

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Garware Hi-Tech Films' (NSE:GRWRHITECH) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Garware Hi-Tech Films:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.16 = ₹3.8b ÷ (₹25b - ₹2.3b) (Based on the trailing twelve months to December 2024).

So, Garware Hi-Tech Films has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 13% generated by the Chemicals industry.

View our latest analysis for Garware Hi-Tech Films

In the above chart we have measured Garware Hi-Tech Films' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Garware Hi-Tech Films .

The Trend Of ROCE

Investors would be pleased with what's happening at Garware Hi-Tech Films. The data shows that returns on capital have increased substantially over the last five years to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 50% more capital is being employed now too. So we're very much inspired by what we're seeing at Garware Hi-Tech Films thanks to its ability to profitably reinvest capital.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Garware Hi-Tech Films has. Since the stock has returned a staggering 448% to shareholders over the last three years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, Garware Hi-Tech Films does come with some risks, and we've found 1 warning sign that you should be aware of.

While Garware Hi-Tech Films isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.